China Merchants (6099) SWOT Analysis / TOWS Matrix / MBA Resources
Investment Services
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for China Merchants (Hong Kong)
Based on various researches at Oak Spring University , China Merchants is operating in a macro-environment that has been destablized by – there is increasing trade war between United States & China, challanges to central banks by blockchain based private currencies, supply chains are disrupted by pandemic , banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing household debt because of falling income levels, there is backlash against globalization, cloud computing is disrupting traditional business models,
increasing commodity prices, wage bills are increasing, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that China Merchants can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the China Merchants, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which China Merchants operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of China Merchants can be done for the following purposes –
1. Strategic planning of China Merchants
2. Improving business portfolio management of China Merchants
3. Assessing feasibility of the new initiative in Hong Kong
4. Making a Investment Services sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of China Merchants
Strengths of China Merchants | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of China Merchants are -
Analytics focus
– China Merchants is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the Investment Services industry. The technology infrastructure of Hong Kong is also helping it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Learning organization
- China Merchants is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at China Merchants is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at China Merchants emphasize – knowledge, initiative, and innovation.
Low bargaining power of suppliers
– Suppliers of China Merchants in the Financial sector have low bargaining power. China Merchants has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps China Merchants to manage not only supply disruptions but also source products at highly competitive prices.
Organizational Resilience of China Merchants
– The covid-19 pandemic has put organizational resilience at the centre of everthing China Merchants does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Sustainable margins compare to other players in Investment Services industry
– China Merchants has clearly differentiated products in the market place. This has enabled China Merchants to fetch slight price premium compare to the competitors in the Investment Services industry. The sustainable margins have also helped China Merchants to invest into research and development (R&D) and innovation.
Ability to recruit top talent
– China Merchants is one of the leading players in the Investment Services industry in Hong Kong. It is in a position to attract the best talent available in Hong Kong. The firm has a robust talent identification program that helps in identifying the brightest.
Operational resilience
– The operational resilience strategy of China Merchants comprises – understanding the underlying the factors in the Investment Services industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Training and development
– China Merchants has one of the best training and development program in Financial industry. The effectiveness of the training programs can be measured in – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Superior customer experience
– The customer experience strategy of China Merchants in Investment Services industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Ability to lead change in Investment Services
– China Merchants is one of the leading players in the Investment Services industry in Hong Kong. Over the years it has not only transformed the business landscape in the Investment Services industry in Hong Kong but also across the existing markets. The ability to lead change has enabled China Merchants in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Successful track record of launching new products
– China Merchants has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. China Merchants has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Cross disciplinary teams
– Horizontal connected teams at the China Merchants are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Weaknesses of China Merchants | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of China Merchants are -
Capital Spending Reduction
– Even during the low interest decade, China Merchants has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the Investment Services industry using digital technology.
Need for greater diversity
– China Merchants has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, China Merchants is slow explore the new channels of communication. These new channels of communication can help China Merchants to provide better information regarding Investment Services products and services. It can also build an online community to further reach out to potential customers.
High operating costs
– Compare to the competitors, China Merchants has high operating costs in the Investment Services industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract China Merchants lucrative customers.
High cash cycle compare to competitors
China Merchants has a high cash cycle compare to other players in the Investment Services industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Interest costs
– Compare to the competition, China Merchants has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of China Merchants supply chain. Even after few cautionary changes, China Merchants is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left China Merchants vulnerable to further global disruptions in South East Asia.
Products dominated business model
– Even though China Merchants has some of the most successful models in the Investment Services industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. China Merchants should strive to include more intangible value offerings along with its core products and services.
High dependence on China Merchants ‘s star products
– The top 2 products and services of China Merchants still accounts for major business revenue. This dependence on star products in Investment Services industry has resulted into insufficient focus on developing new products, even though China Merchants has relatively successful track record of launching new products.
Compensation and incentives
– The revenue per employee of China Merchants is just above the Investment Services industry average. It needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
Aligning sales with marketing
– From the outside it seems that China Merchants needs to have more collaboration between its sales team and marketing team. Sales professionals in the Investment Services industry have deep experience in developing customer relationships. Marketing department at China Merchants can leverage the sales team experience to cultivate customer relationships as China Merchants is planning to shift buying processes online.
China Merchants Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of China Merchants are -
Redefining models of collaboration and team work
– As explained in the weaknesses section, China Merchants is facing challenges because of the dominance of functional experts in the organization. China Merchants can utilize new technology in the field of Investment Services industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Leveraging digital technologies
– China Merchants can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Investment Services industry, but it has also influenced the consumer preferences. China Merchants can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Lowering marketing communication costs
– 5G expansion will open new opportunities for China Merchants in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Investment Services industry, and it will provide faster access to the consumers.
Learning at scale
– Online learning technologies has now opened space for China Merchants to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Loyalty marketing
– China Merchants has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Building a culture of innovation
– managers at China Merchants can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Investment Services industry.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects China Merchants can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for China Merchants to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for China Merchants to hire the very best people irrespective of their geographical location.
Creating value in data economy
– The success of analytics program of China Merchants has opened avenues for new revenue streams for the organization in Investment Services industry. This can help China Merchants to build a more holistic ecosystem for China Merchants products in the Investment Services industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help China Merchants to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. China Merchants can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, China Merchants can use these opportunities to build new business models that can help the communities that China Merchants operates in. Secondly it can use opportunities from government spending in Investment Services sector.
Threats China Merchants External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of China Merchants are -
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
High dependence on third party suppliers
– China Merchants high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for China Merchants in the Investment Services sector and impact the bottomline of the organization.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, China Merchants may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Investment Services sector.
Regulatory challenges
– China Merchants needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Investment Services industry regulations.
Consumer confidence and its impact on China Merchants demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in Investment Services industry and other sectors.
Environmental challenges
– China Merchants needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. China Merchants can take advantage of this fund but it will also bring new competitors in the Investment Services industry.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. China Merchants will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Increasing wage structure of China Merchants
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of China Merchants.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Investment Services industry are lowering. It can presents China Merchants with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Investment Services sector.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of China Merchants.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, China Merchants can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate China Merchants prominent markets.
Easy access to finance
– Easy access to finance in Investment Services industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. China Merchants can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Weighted SWOT Analysis of China Merchants Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at China Merchants needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of China Merchants is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of China Merchants is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of China Merchants to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that China Merchants needs to make to build a sustainable competitive advantage.
